The National Budget 2020 does precisely what CDE has called for over the past few years. Finance Minister Tito Mboweni is pursuing fiscal consolidation by proposing to slow the growth of government’s payroll costs
Despite these brave budget cuts, which save R160 billion over the next three years, government spending will still exceed revenue for that period, and debt will continue to rise, from 62% of GDP in 2019/20 to 72% of GDP in 2022/23.
There are concerns about whether government can deliver on this budget, partly because growth projections seem overly optimistic and partly because fiscal policy implementation depends on government amending the three-year public sector wage agreement before the third year starts.
However, even if government succeeds and growth projections are correct, debt will continue to rise, both in absolute terms and relative to GDP, as we are far from achieving a primary balance.
This means that South Africa’s public finances can no longer be stabilised without faster economic growth. Brave as Mboweni’s decisions are, they still do not do what is required.